What You Need to Know About the U.S. Foreign Account Tax Compliance Act

The IRS is seen by many people as a scary, and somewhat overbearing entity. In 2015, the U.S Foreign Account Tax Compliance Act (FATCA) was enacted, which scared a lot of the U.S citizens living abroad. Many of these people were completely unaware of their requirement to file taxes in the U.S. Since FATCA came into effect, you might be wondering what it means to you. Who is required to file, how filing is to be done, and what, if any, are the consequences are the common questions people have been asking with respect to the FATCA.

Who Does this Impact?

The U.S. government taxes everyone who is tied to the U.S. at all, this includes citizens living abroad, anyone living in the U.S., as well as any green card holders. If you lived in the U.S., then you already would have filed your taxes. This act was an effort by the U.S. government, to ensure that U.S. citizens who live abroad are aware of the laws around filing. This means that this act impacts any U.S. citizen living abroad, and it is estimated that one million U.S. citizens that live in Canada were going to need to file under this act. While the FATCA was implemented several years ago, it is still in effect, and filings must still be complete for every tax year.

How to File

The U.S. set up a streamlined process to help deal with the volume of filings that have come forth when FATCA was first enacted. The “Streamlined Foreign Offshore Procedures”, which can be found on the IRS’s website can help most people out. However, depending on how complex your financial situation is, it may be worthwhile to hire someone to complete your US tax preparation in Ontario, Canada.

Consequences

There was some fearmongering in the early days of the FATCA that the IRS was going to start seizing foreign assets. This is not what the IRS had planned. The real goal of the FATCA was to ensure everyone was aware of their filing requirement. In fact, most people do not actually own any money to the IRS, but the completion of the paperwork keeps you compliant.